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ISSUES IN ACCOUNTING EDUCATION American Accounting AssociationVol. 25, No. 3 DOI: XXXX2010pp. 1–XXXX
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Audit Education and the Real-Time Economy
Miklos A. Vasarhelyi, Ryan A. Teeter, and JP Krahel
ABSTRACT: The real-time economy �RTE� changes the way accounting information isreceived, processed, and analyzed. Consequently, it drives demand for auditors whopossess enhanced skills and attitudes. Unsurprisingly, the current generation of audit-ing students expects to be well prepared when entering the profession and facing thesenew challenges. Auditing educators have the unique opportunity to assume a leadingrole and empower modern auditors, arming them with the best weapons available tocombat error and fraud. This position paper discusses the changing function of theauditing profession, analyzes the advancement of auditing technology featuring con-tinuous auditing and monitoring, and identifies three primary attributes �attitudes, tech-nical competences, and behaviors� that will define the RTE auditor. For each of theseattributes, this paper identifies educational media �or instructional tools� that may beincorporated into auditing curricula as a way of introducing and developing these skills.
In years to come, experts predict, many companies will use information technology to become a“real-time enterprise”—an organization that is able to react instantaneously to changes in its busi-ness. And as firms wire themselves up and connect to their business partners, they make the entireeconomy more and more real-time, slowly but surely creating not so much a “new” but a “now”economy.
—The Economist 2002
INTRODUCTIONhe real-time economy �RTE� is here. Businesses thrive or fail from one moment to the next,people share information instantaneously, and millions of economic transactions flow fromaccount to account through massive information systems. The “now” economy has forced
martphone-enabled sales forces to endure virtually uninterrupted work hours, and managers tombrace global team-directed efforts. This environment represents a time of great change fornanciers, accountants, and auditors. No longer do the old techniques of evaluating businessistory provide sufficient information to managers and stakeholders; rather, auditors need a pow-rful set of skills to provide enhanced assurance.
Audit education can lead the way as the audit environment changes. The progressive techno-ogical advances that are fundamental to the RTE require auditors to re-think the way they ap-roach an engagement. Audit educators must provide training that is not only sufficient to meet theeeds of this new environment, but also empower students to embrace the rapid changes of the
iklos A. Vasarhelyi is a Professor and Ryan A. Teeter and JP Krahel are Ph.D. students, all at the Stateniversity of New Jersey.
e are grateful for comments received from Greg Gerard, Michael Alles, Victoria Chiu, and two anonymous reviewers.
Published Online: xx 2010
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ew economy �Amernic and Craig 2004; Boyce 2004; Howieson 2003�. This paper attempts toefine and describe the shift needed in auditing education toward the real time economy andontinuous auditing.
Throughout this paper, we identify motivating factors, specific skills, and instructional mediahat relate to three principal attributes of an RTE auditor: attitudes refer to a set of views of theorld that should be incrementally transmitted to entrants to the audit profession; behavior indi-
ates the nature of the interaction between the auditor and clients, regulators, audit teams, andechnology; objective knowledge includes specific knowledge and skills required to conceptualize,mplement, and operate an RTE audit.
This position paper is organized as follows: the second section provides an overview of theTE and the continuous auditing model. The third section presents the attitudes, behavior, andbjective knowledge components found in the RTE auditor skill set. The fourth section contains aample of relevant instructional media found in accounting education literature. The fifth sectionummarizes the paper, reviews the strengths and weaknesses of our proposed approach, anduggests additional areas of research.
To aid the reader, the main concepts and elements of this paper are summarized in a knowl-dge map, presented in Figure 1. The map follows the progression of this paper from left to rightnd focuses on the auditor attributes in the central column. The left column identifies motivationallements to this paper, the right identifies instructional media, and arrows delineate paths linkingotivation and media to skills.
THE REAL-TIME ECONOMY AND CONTINUOUS AUDITINGThe RTE adds new requirements for the training of auditors, including ethical attitudes, risk
easurement and management competencies as well as the ability to think and make judgments inn unstructured setting. For example, much of the audit burden has shifted from external tonternal auditors as a result of Auditing Standard No. 5 �AS5; �PCAOB 2007�. Rebalancing allowsnternal auditors to play a greater role in providing audit evidence. AS No. 5 has been the primary
otivator for the audit load rebalancing effort, demonstrated in a recent survey of audit officersProtiviti 2008�. Many leading organizations, anticipating this shift, are adopting technology thatllows them to limit their exposure �see Alles et al. 2006�. This attitude is quite different from theurrent ex-post facto audit. This creates an environment that is conducive to the introduction ofeal-time auditing.
he Nature of the Real-Time Economy (RTE)The use of internal real-time reporting is substantially increasing. Coming years will see more
imble and adaptive companies integrated into the global economy. The evolution of these tech-ologies and their integration into business will also introduce behavioral effects that may accel-rate or delay progress.
In addition to the advent of technology, the RTE can be characterized by a substantiveeduction in the delays within and between processes �Vasarhelyi and Alles 2008�. This is enabledy the progressive digitization through the application of technology �Vasarhelyi and Greenstein003�. Digitization further reduces these delays and, when implemented properly, gives the orga-ization competitive advantage �Powell and Dent-Micallef 1997�. Additional benefit can be ob-ained through the acceleration of data transfer, facilitated by XML and XBRL �Bovee et al. 2005�.
The assurance function is being automated to gain efficiencies and cope with the changes thatccur in the underlying reporting structure. The auditing function has witnessed a similar phe-omenon. It took little time from the introduction of PCs for large audit firms to purchase sub-tantial quantities of these devices. They replaced the cumbersome and time-consuming footing,xtending, and ticking with data extraction software and user-friendly spreadsheets. While the
ssues in Accounting Education Volume 25, No. 3, 2010merican Accounting Association
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uditors possessed this clear early advantage, such enthusiasm has not carried through to some ofhe newer auditing tools. The literature attributes this mainly to: 1� the ossifying effect of obsoletend unchanging regulatory statutes, 2� the investment-inhibiting nature of the partnership structuref auditing firms, and 3� the risk averse nature of accountants �Curtis and Payne 2008�. Auditingducation, responding to the needs of the professional accounting firms, has reacted accordingly.
The contrast between management information systems and traditional auditing tools is no-able �Figure 3�. While business systems are leveraged for cross-application integration, auditingools are relegated to data extraction, cumbersome spreadsheets, manual manipulation, and limitedutomation. Dashboards and executive information systems provision more timely data �e.g.,tatus updates every six hours�, but auditors are limited by a statute-driven manual reportingcheme.
Numerous modern companies across various domains have developed a wide array of appli-ations to explore the benefits of the RTE. Use of progressive automation has enabled them to gainompetitive advantage and become leaders in their fields. Vasarhelyi �2009� has collected several
FIGURE 1Knowledge Map
ssues in Accounting Education Volume 25, No. 3, 2010American Accounting Association
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f these examples.1 Many of these strategic applications dramatically changed the nature of theusiness and forced competitors to copy or perish. Likewise, by embracing automated audit tools,TE auditors have the potential to change the nature of audit.
ontinuous AuditingIf the stakeholders in the RTE environment are to make use of real-time data, then auditors
ave an obligation to provide assurance for that data as it is issued. Unless RTE auditors under-tand the technology and environment, they cannot provide relevant services to modern investorsnd managers. Audit automation facilitates the transition from the traditional audit of historicalnancial data to auditing of current, real-time financial and nonfinancial information.
Continuous auditing provides assurance on real-time information within an organizationVasarhelyi and Halper 1991�. The CICA/AICPA �1999, xiii� defines continuous audit as “a meth-dology that enables independent auditors to provide written assurance on a subject matter usingseries of auditors’ reports issued simultaneously with, or a short period of time after, the occur-
ence of events underlying the subject matter.” These automated tools are used to determinehether a firm’s data is adequately maintained and internal controls function properly. Extensive
esearch has been conducted regarding the functionality, challenges, and benefits of continuousuditing in academia,2 by professional associations �CICA/AICPA 1999; IIA 2005� and publicccounting firms �PricewaterhouseCoopers 2002; Searcy et al. 2002�.
Continuous auditing has matured from a pilot test at AT&T Bell Laboratories �Vasarhelyi andalper 1991� to a progressive reality affecting organizational management, and internal and ex-
ernal audit organizations. From large banks to multinational consumer goods firms, the adoptionf continuous auditing is driving auditors to reevaluate their functions, tools, processes, andttitudes �Vasarhelyi and Kuenkaikaew 2009�. Vasarhelyi and Kuenkaikaew �2009� observe a wideange of audit-like organizations, very slow and heterogeneous adoption of technology, low levelf technical competence among auditors, and widely varying methods of audit management. Byontrast, empowered internal auditors are adopting technology to monitor their companies’ sys-ems, illustrating the changing and dynamic audit climate.
Continuous auditing includes three primary components �Figure 2�. Continuous controlsonitoring �CCM� consists of a set of procedures used for monitoring internal controls. Continu-
us data assurance �CDA� verifies the integrity of data flowing through the information systems.ontinuous Risk Monitoring and Assessment �CRMA� is used to dynamically measure risk androvide input for audit planning.
While continuous monitoring of access controls and authorizations is well developed in com-uter security applications �Jajodia et al. 1997�, monitoring enterprise system configuration andusiness process settings remains an emerging area of development. Implementation strategies forCM, CDA, and CRMA require skills that will be developed by the RTE auditor.
ontinuous Controls MonitoringCOSO �2009� defines CCM as the “periodic evaluation and testing of controls by internal
udit.” CCM has the ability to “enhance the efficiency and effectiveness of the whole internalontrol system” �COSO 2009� by determining whether errors exist and helping internal auditorsnd managers resolve controls weaknesses before they perpetuate into larger problems. In recentears, the push for CCM implementation at some firms has originated from management andnternal audit requirements, rather than from external audit firms �Brown et al. 2007; COSO 2009�.
See: http://raw.rutgers.edu/RTEexamples.See Brown et al. �2007� for an extensive literature review on the subject of continuous auditing.
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Firms that implement CCM are likely to build on the expertise of seasoned auditors whonderstand the controls framework and how the firm operates �Vasarhelyi and Alles 2008; Teetert al. 2009�. This expertise aids the conversion of manual control assessment to automated plat-orms and provides validation of the effectiveness of the implemented controls. 21st centuryuditors need to understand the concepts being shared by seasoned auditors and help incorporatehem into the RTE environment.
Examples of CCM include procedures for continuously monitoring:
• User access control and user account authorizations;• System controls configuration; and• Settings and workflows related to business processes.Auditors implementing and performing CCM will have to be highly sensitive to the control
nvironment, be able to talk to the client professionally about controls and their weaknesses,nderstand the intricacies of the effects of overlapping controls, be able to work with clients toefine rules that emulate requirements of the IT audit, and possess other related skills.
ontinuous Data AssuranceContinuous auditing depends on accurate data, such as personnel information and financial
ransaction figures, flowing through information systems. Continuous data assurance evaluates thentegrity of the financial and nonfinancial transactions to ensure that errors in the data are mini-
ized. Valid data translates into valid information upon which management and auditors can basealid decisions �Vasarhelyi and Halper 1991; Alles et al. 2006; Elliot 2002�.
Examples of CDA include procedures for verifying:
• Underlying master data;• Transactional data flows; and
FIGURE 2Components of Continuous Auditing
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• Key process metrics using analytics �including continuity equations�.Auditors performing CDA will have to have improved process design and implementation
kills, possess a better understanding of statistics, be able to communicate with the client request-ng data verification instances �e.g., positives—false and true—data verification�, and be veryensitive to the nature of errors and potential fraud. While auditors today have a certain degree ofata extraction skills, auditors �internal and external� will have to be very knowledgeable aboutrawing data from ERPs, flat files, data flows, and data warehouses. Given the frequency of dataxtraction, reliance on IT experts to draw this data for the auditor is not feasible.
ontinuous Risk Monitoring and AssessmentRisk assessment procedures have been an integral part of the traditional audit for many
ecades. Companies have a portfolio of risk containing risk elements, such as management risknd audit risk. Management risk influences audit risk and the weighting of these risks fluctuates inesponse to changing business conditions. The audit planning process encompasses the assessmentf auditor perceptions and an allocation of audit resources to high-risk areas.
While there are many forms of guidance in the literature and statutes, this process is stillague and ad hoc; audit firms have their own systematized approaches but are heavily reliant onnstructured assessments and judgment. Internal audit departments generally will perform annualudit plans and similar risk assessment. They will determine the change in audit risk as it relateso the greater management risk portfolio. The allocation of audit resources will tend to respond toorporate contingencies and often bend to pragmatic issues such as availability of data, politicalnvironment, and management concerns �Vasarhelyi and Kuenkaikaew 2009�. Often the internaludit planning processes will be analogous to those of the large audit firms:
• Divide the audit risk frame into manageable parts;• Understand the basic profile of risk of each of the parts;• Work on proposing joint risk profiles; and• Create scenarios.CRMA takes the COSO �2009� monitoring framework a step further. It includes processes
hat:
• Measure risk factors on a continuing basis;• Integrate different risk scenarios into some quantitative framework; and• Provide inputs for audit planning.Auditors performing CRMA will have to be very well versed in enterprise risk management
rinciples and audit risk assessment practices included in the COSO �2009� framework. They willeed an openness to change during to react to the risk environment. The audit plan and proceduress well as the weighting of audit evidence will have to be rebalanced. Therefore, auditors will needo re-parameterize monitoring procedures during the audit.
ontinuous ReportingContinuous reporting is the release of financial and nonfinancial information on a near real-
ime basis �Hunton et al. 2004; Gal 2008�. It reduces the delay inherent in traditional reporting androvides a more accurate picture of a firm’s financial position. The adoption of XBRL by compa-ies for both external and internal reporting makes consolidation and release of this informationore feasible �Murthy and Groomer 2004�. RTE auditors work with client information and will
equire new specialized tools to aid in this enhanced disclosure.Continuous reporting will pose additional challenges for auditors. Continuous measurement is
ecessary for a continuous audit. The monitoring approach will further differentiate, integrate, andhange the roles of management, internal and external audit, and other audit-like functions �Vasar-
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elyi and Kuenkaikaew 2009�.3 The set of skills developed for this environment will bring anttitude of preference for online monitoring rather than archival analysis, the ability to make rapidecisions based on feedback from these systems, and improved statistical competence.
THE RTE AUDITOR SKILL SETAuditors need to possess skills that will help them meet the demands of the real-time
conomy and continuous auditing �Zhao et al. 2004�. Attitudes and contextual knowledge will helphem understand the technology they will be expected to use as they conduct their audits. Theuditor’s ability to work effectively in a team and enhance an integrated audit is reflected in theehavior the auditor demonstrates. The left area of Figure 3 illustrates dynamics facing the tradi-ional auditor, and the right area outlines some of the tools and resources available in the RTE.
The traditional auditor focuses on a firm’s history. Armed with a Certified Public AccountantCPA� credential, he works to extract sample data from legacy and heterogeneous informationystems. In the technology realm, he uses spreadsheets, basic sampling, and analytical techniques.he outcome of his work is a certification of the financial statements prepared by management.
Vasarhelyi and Kuenkaikaew �2009� found that major organizations have several overlapping and conflicting internalaudit-like functions such as fraud, internal control, internal audit, Basel II, etc. They predict that eventually thesefunctions will be rationalized and substantially integrated.
FIGURE 3The Real-Time Audit Environment
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uch of what he does is delegated by the audit manager with minimal interaction with internaluditors. The constant concern about litigation keeps him risk averse and understandably resistanto change. All of the work is performed several months after the occurrence of relevant events. Asresult, any material errors or instances of fraud that have occurred in that past period have had
ime to propagate and create additional difficulty for his team.The RTE auditor, on the other hand, is ready to work with current information. Past data can
ertainly help model the future, but her forward-looking view allows her to react to problems ashey occur and work with management to solve them. She may possess other certifications inddition to a CPA license. She realizes that events occur in real time, so she is proactive in treatingew forms of ethical dilemmas, open to change, and always searching for tools that will help herlient remain a going concern. Working alongside an empowered internal audit team, she coordi-ates, delegates, and evaluates the integrated information systems that ingest millions of transac-ions, ensure that management knows that controls are working, and give stakeholders an accurateicture of the client’s standing. In order to conceptualize, implement, and operate these systems,he RTE auditor understands the technology and statistics that provide a continuous audit andssurance of the system. Spreadsheets become one of many tools that she uses. Finally, she has thebility to work remotely and find solutions to problems if she is unsure in a situation. The RTEuditor’s skill set is the key to her success. The attitude, behavior, and objective knowledgeifferentiate her from the traditional auditor.
ttitudesAttitudes drive the dynamic transition from traditional auditing to an RTE paradigm. Many of
hese attitudes are developed long before a student enters an accounting program. However,xposure to the issues facing the RTE, such as technology adoption and change management,hould enable students to refine these skills and anticipate the situations they may encounter.
thicsWhile there is open debate over whether ethics can be taught �Leung and Cooper 1994�,
ccounting education has witnessed a remarkable incorporation of ethical discussion into class-oom protocol. The RTE introduces new ethical quandaries related to information provisioning,he automation of entire sub-processes, the global nature of business activities, and the emergingse of technology in the workplace.4
echnology AdoptionThe development and application of technology within business requires auditors to have an
ttitude of constant technology discovery. Greenstein-Prosch et al. �2008, 45� state “�a�uditorsould normally be expected to have higher knowledge than the average accountant since theyust audit the work of many different clients with diverse information systems.” They find that
uditors are already well versed in e-commerce, general office automation, and some audit auto-ation. We assert that RTE auditors must be able to evaluate technology and match capabilities
nd features to the needs of the audit.
penness toward ChangeChange in technology, social trends, business processes, accounting standards, and accountant
ehavior is a part of life. As the audit requirements change, the RTE auditor must possess anttitude that allows her to respond. This skill increases the effectiveness of the audit. Auditors need
For a well-documented list of resources for ethics in accounting, see the work of Thomas �2004�.
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o possess the ability to adjust their behavior in the RTE. The same adaptability is required forrogressively dynamic standards, business activities, and, most of all, changes in risk profile.
ehaviorThe RTE will require many changes in the behavior of the auditor. These changes can be
acilitated and encouraged by audit educators. The primary focus should be on encouraging stu-ents to foster an attitude of lifelong learning. They should understand what the RTE is and howt will affect their function as auditors.
lient InteractionFuture engagements will typically involve substantially more remote interaction and data
ransfer with less face-to-face interaction. Educators will need to define and demonstrate thealance between a need for audit deterrence, a decreasing auditor presence in the facility, constantuditor-client interface, and an increased “audit by exception” approach. As remote audits becomencreasingly common, auditing students will also need to learn how to deal with clients and team
embers when they are far apart and unable to meet in person.
orking with a TeamAs is the case in many other business processes, virtual teams will turn from the exception to
he norm, aiming to explore and exploit niche competencies, diverse geographic locations, unco-rdinated and often unpredictable audit actions and plans �Blackburn et al. 2003�. Audit educatorsust emphasize the importance of proper virtual teamwork, discussing the attributes of a success-
ul virtual team as distinct from a group operating in physical proximity to one another.
ealing with Standard Setting Entities and RegulatorsTo meet the needs of RTE participants, there will be an increased set of regulations. Conse-
uently, auditors will be required to interface with government entities and standard setters on aore frequent basis. The relationship between auditors and standard setters will eventually entailwide range of knowledge management and information provisioning tools. For example, the
EC has been provisioning an XBRL instance reader during the deployment of the rule in the U.S.ducators must account for this eventuality by both familiarizing students with the most up-to-ate standards-retrieval methodologies available and empowering them to discover future toolsater on in their careers.
anaging the EngagementAudit educators must anticipate and address the challenges posed by the virtual team, the
uditor’s virtual presence over a virtually uninterrupted time frame, and the existence of a wideamut of bespoke audit tools. Furthermore, as most audit entities will have engagement manage-ent tools that are complex and often not tailored for one particular auditor, company, or client,
he educator’s inclusion of training for any engagement management software5 would represent aremendous benefit to students.
earning Technology on the JobDue to the rapid and constant changing of technology and standards, educators will need to
ocus more of their time on imparting an understanding of key underlying accounting concepts.he minutiae of standards and procedures are already extensively embedded in ERPs. Studentshould know where to efficiently locate auditing and accounting standards on the Internet and
For example, Thomson provides online training for and a free trial of its Engagement CS software athttp://cs.thomsonreuters.com/engagement.
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hrough various other sources, and how to extract information in order to formulate integrativenowledge from these sources. By gaining this core competency, students will ideally possessnough basic accounting understanding to knowledgeably search for information, but they will note overloaded by an overabundance of detail. Their integrative knowledge will combine basic andcquired information to formulate an integration of accounting rules, audit evidence, and relevantusiness facts on which to base judgment.
bjective KnowledgeAudit education must ensure that students understand the key concepts underpinning modern
ccounting software �Greenstein-Prosch et al. 2008�. While they need not be IT professionals,tudents should have an understanding that reaches beyond the level of office software. They needo understand what the “black box” is doing to produce the evidence they will evaluate and thenalytics being used in common algorithms. For example, many CCM procedures are rule-based.ppreciating how key performance indicators are monitored provides insight into how controls
unction.
asic Understanding of Technology
Interacting with corporate IT requires a set of skills that goes far beyond basic PC compe-ences, similar to attitudes toward technology adoption and an individual’s ability to change.dvancing beyond this basic level will require accounting educators to foster an understanding of
ssential principles in hardware, software, and business applications.
T Audit
There is virtually no limit to the power, speed, or granularity of future audit technology. Inandem with the need to ensure understanding of basic IT principles, audit educators must famil-arize their students with audit automation tools and more advanced software aimed at data ex-raction, manipulation, control evaluation, sampling, exception reporting, separation of duties,raud detection, etc. Specially designed continuous audit software will become a critical part of theay-to-day lives of auditors; it is the job of the educator to prepare them for it today.
ccounting and Auditing Knowledge
Anticipating the coming confluence of IFRS GAAP and U.S. GAAP �Thomas 2009�, account-ng education in the RTE will be forced to deemphasize factual details and emphasize the abilityo intelligently seek details in databases and knowledge bases that have only recently becomevailable.
ertifications
While the CPA certification remains dominant, the broader set of career paths available toccounting professionals is increasing the value and visibility of alternative certifications �Charronnd Lowe 2009�. Rather than focusing entirely on the CPA exam, students should be shownlternatives and complementary certifications that may more accurately match their interests andompetences. Examples include:
• Certified Information Systems Auditor �CISA�, given by ISACA;• Certified Internal Auditor �CIA�, given by IIA;• Certified Fraud Examiner �CFE�, given by ACFE; and• Certified Information Technology Professional �CITP�, given by the AICPA to qualifying
CPAs.
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ADAPTING AUDIT EDUCATIONAccountants and auditors need to be equipped with a sufficient understanding of how changes
ill affect their work. The traditional accounting education model tends to rely on knowledge ofccounting concepts and rules �Figure 3, left side�. Audit education must shift students’ focus ontottitudes, behavior, and objective knowledge. Putting these three dynamics at the core of an auditducation program will prove immensely beneficial to the RTE auditor.
Just as the RTE will force managers and auditors to re-consider current practice �Stewart000�, it will also require a substantial rethinking of educational objectives and processes. Under-raduate audit education has adapted, to a certain degree, with the introduction of additionalfferings such as second audit and forensic courses, increased emphasis on IT audit, adoption ofases, and substantial inclusion of vendor-provided teaching materials. However, any further stepsaken by audit educators to foster improved attitudes toward lifelong learning of IT will im-
ensely benefit students.Audit educators are a critical link between today’s auditing students and tomorrow’s
echnology-laden auditing environment �Auditing Section Education Committee American Ac-ounting Association 2003�. Because new technologies are driven by the state of the art, it ismperative to teach future auditors these skills while they are still young, as younger people haveeen found to be most likely to adopt new technology �Morris et al. 2005�. Educators owe it toheir students to present the approaching ‘real world’ with as much accuracy and candor asossible. These emerging ranks of new auditors, armed with the right tools and competency inheir usage, will be the ones to simultaneously handle and drive the change within their auditrms.
The attributes we advocate in this position paper will ideally be taught primarily in under-raduate auditing courses and fraud courses, as well as their graduate level equivalents. Theyhould not, however, be omitted from other introductory and intermediate courses, as theseourses form the foundation upon which auditors base their expertise. Some of the more technicalttributes may be supplemented by additional courses in subjects such as statistics and manage-ent information systems.
ducating the RTE AuditorStudents should understand what goes into CDA, CCM, and CRMA, and how it will affect
heir future audit engagements. CA instruction can open students’ minds to business processutomation. Students can practice using analytical and statistical tools, such as ACL or SAS, andecture time should be dedicated to explaining the mechanics behind the analytics being per-ormed. The instructor can then link engagement steps to audit objectives and help students adjustheir plans as evidence from the continuous audit is introduced.
ducating Attitudes
The attitudes adopted by auditors in relation to ethics, technology adoption, change, anddaptability are currently based upon a static paradigm. Moving from traditional, detached viewsf technology to a more open and proactive view requires a shift that can be addressed using manyxisting forms of instructional media. In Table 1, we link those media to changing attitudes andhow how to address these changes.
ducating BehaviorThe way auditors react is as important as their a priori attitude. In shifting from traditional
uditor behavior to skills required in the RTE, identifying sources of information and conductingdditional team simulations will help students determine correct responses, interact with different
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ersonalities, and determine where to find answers to open questions. Table 2 provides guidelinesor instruction based on these changes.
ducating Objective Knowledge—Accounting and TechnologyObjective accounting knowledge can aid students in identifying how to use emerging tools to
erform more efficient and effective audits for their clients. Table 3 links a series of changednowledge base needs of the auditor to a more modern knowledge set. These needs are segmentedased on the usage and context of basic IT and other wider learning needs.
nstructional MediaAn instructional medium is defined here as any method or tool designed to facilitate learning
nd instruction to satisfy a set of learning objectives. Lectures, cases, software instruction, soft-are exercises, classroom presentations, projects, group assignments, and other tools can be used
ndependently or aggregated as instructional media. To help educators in developing students’ RTEkills, we have gathered some examples from the literature and our own experience. This sectionill link the new auditor skill set to a series of instructional media.
While these media are extensively discussed in the literature, they are only beneficial if theyre adopted, fundamentally altering the traditional stand-and-deliver approach. It is not enough toive lip service to a new technique; the educator must understand and appreciate the reasoningehind the technique in order to use it effectively. For example, our own anecdotal evidenceuggests that students arbitrarily assigned case studies feel there is not sufficient time and discus-ion dedicated to maneuvering the details of the case. Students perceive poorly used media andearning aids as a waste of time �Jones and Wright 2010�. Thoughtful and deliberate inclusion ofhe media discussed in this section is intended to provide value to an auditing course.
TABLE 1
Teaching Attitudes in the RTE
kill Traditional Approach RTE ApproachSample Instructional
Media
thics A segmented approachto ethical behavior.
A proactive integrativeattitude towards ethicalbehavior andconsideration for newdilemmas related to theRTE.
Case/Simulation: Usecases tied to teamsimulation, withadditional ethicalambiguity.
echnologyadoption
Spreadsheet-basedapproach.
Constant search for newrelevant technologies.
Context: Identifyresources for students toexplore. Remote: Assignprojects that require anonline/remotecomponent.
penness towardchange
Change limited byregulation and litigationconsiderations.
Openness to change. Simulation: Run teamsimulations incorporatingcost/benefit analysis andexamples of successfulimplementation.
Substantial conformityto rigid audit andaccounting standards.
Adaptability—risk-based assuranceand principle-basedaccounting.
Lecture: Expand thediscussion of risk andIFRS.
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The media include lectures, cases, team simulation, remote projects, contextual learning re-ources, supplemental instruction, and emerging methods. While we attempt to identify use ofhese tools to enhance the RTE auditor instruction, this list is by no means intended to be com-rehensive or exhaustive.
ectureLectures remain central to the current learning process, but there remains ample opportunity
o tweak them for the RTE skill set. Through exposure to lecture-enhancing tools, such as tabletCs and real-time classroom response systems, students are more likely to get accustomed to newses of technology and experience the process of technology adoption firsthand.
Using lectures simply to explain how technology works or provide a hands-off demonstrationay not be sufficient for students to gain confidence with these tools. Altering the traditional
ecture format to include more hands-on experience may spark a student’s intellectual curiositynd problem solving skills in a controlled environment. Guest speakers, discussions, and other
TABLE 2
Modifying Behavior in the RTE
kill Traditional Approach RTE ApproachSample Instructional
Media
lient interaction Face-to-face interaction Traditional clientinteraction withremote/distancecoordination
Simulation: Auditsimulation teamworkwith role-playing of bothauditor and client; haveteams perform thesimulation using onlineconferencing tools.
eamwork On-site teams Remote teammanagement
Remote: Requiredistance interaction forthe audit team in thecase above.
anaging theengagement
Predetermined auditplan
Dynamic engagement Lecture: Identify steps ofan engagement withtight linkage to auditobjectives. Context:Introduce evidence thatforces teams to makeadjustments to originalaudit plan.
Sequential audits Simultaneous remoteengagements
Simulation/remote: Runan auditor/client teamsimulation with remoteparticipation feature.
Focus on U.S. GAAP Wider consideration ofbusiness processmeasurement
Case: Introduce aninternational case withcross-nationconsolidation
earningtechnology onthe job
Extensive focusedtraining
Ability to self-teachnew technology tools
Context: Show studentswhere tutorials and helpcan be found; Do notprovide detailedinstructions.
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omplementary elements can help students focus on experiencing an active dialog. As an example,adtke �2004� shares a model for transforming a lecture into an ethical conversation with students,
ncorporating instruction, discussion, and group simulation.
TABLE 3
Focusing on Objective Knowledge
kill Traditional Approach RTE ApproachSample Instructional
Media
asic knowledgeof technology
Introduction totechnology
Fundamentalunderstanding of theconcepts andmethodologies of IT
Lecture/exercise:Enhanced traditionalapproach with hands-oncomponent
T audit Basic IT audit Greater focus on ITaudit
Lecture: More thoroughdiscussion of IT audittools. Exercise: IncludeIT audit softwareassignments
echnologicalaudit tools
Limited mention ofaudit-specific softwaretools
Automated work papers Exercise: Cloudcomputing exercise tomanage auditor/auditclient simulation
Performance of dataextraction
Exercise: ACL/IDEAutilization assignments
Use of statisticalanalytical tools
Lecture: Identifystatistical methods to beused and provideexercises with a focuson the usage ofadvanced analytics;Basic overview of astatistical package likeSAS or SPSS
Understanding of ERPs Lecture: Discuss caseson ERP usage, as wellas the basics of ERP
Understanding ofmid-level accountingpackages
Exercise/case:Bookkeeping assignmentusing an accountingpackage �e.g.,QuickBooks� and anaudit case around it.
ccounting andauditknowledge
Memorization ofessential accounting andauditing facts
Wider knowledge setaimed at improvingsearch and informationacquisition skills
Context/case: Discussauditing cases and havestudents hunt for specificprocedures or standards.
ertification Primary focus onpassing the CPA exam
Passing a variety ofprofessional certificationexams; Ability to findinformation in onlineand offline sources;Knowledge of existingsources; Ability toextract/find informationand form a story.
Supplemental: Emphasison broad basicknowledge … reliance
on “test prep courses”Exercise: Series ofpractical exercises ofrapid information searchand contextual reporting
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aseCase studies present the real-world experiences of companies. Used properly, they help read-
rs identify factors that lead to success or failure. The use of cases in accounting curricula is wellocumented in the literature, with examples of cases touching on integrated audit �Gelinas et al.008�, team management �McConnell and Sasse 1999�, and other audit-related themes. Textbooksre lined with cases that present real-world examples in an effort to provoke student thought.
For the future RTE auditor, cases containing more challenging ethical ambiguity can lead toeeper discussion and reflection and enhance ethical training. Additional cases on ERP use andonsolidation with international financial reporting standards can help students hone more special-zed and relevant skills.
eam Simulation and ExercisesIn team simulation, students assume roles of professionals and deal with real-world situations.
xamples of simulation use in teaching concepts from sampling to audit risk are prevalent in theiterature �Gelinas et al. 2008; Green and Calderon 2005; Springer and Borthick 2004; Hiltner983�. Green and Calderon �2005� show that a student’s level of learning and satisfaction increaseith simulation use.
Several approaches to team development are also present in the literature �McConnell andasse 1999�. Bryant and Albring �2006� conduct an extensive review of psychology and organi-ational behavior literature to provide guidance on team building in an accounting environment.
Team simulation helps auditing students develop client-interfacing skills, particularly whenealing with the remote audit. One approach we have attempted divides students into auditor/uditor client teams and presents challenges that these two groups face, including time and man-gement constraints. In this example, teams are assigned to participate as both auditors of oneeam and audit client of another. Throughout the simulation, planning, working papers, etc. can be
aintained on a collaboration website �such as Google Sites� to incorporate a remote/cloud ele-ent �see remote projects� into the scenario. Additionally, teams work through the cost/benefit
nalysis of implementing different forms of audit automation.
emote ProjectsIncreasingly, audit teams conduct remote audit engagements and access electronic work pa-
ers through an online portal provided by their firm. Cloud computing, which enables data storagend access over the Internet or a virtual private network, is becoming more and more relevant asusiness processes and workflows gravitate toward online storage. Exposing students to onlineools, such as Adobe ConnectNow �http://connectnow.acrobat.com� for web conferencing andoogle Sites �http://sites.google.com� for collaborative wikis may prove valuable for them as theyegin their careers. Many of these services are available for students to use free of charge.
ontextual LearningContextual learning is a valuable skill that allows students to identify resources used to help
hem solve problems. Understanding how standards and procedures work and knowing where toocate their definitions and interpretation are vital to the contextual learning paradigm. This isarticularly important in the advent of international standards integration.
Understanding the tools that aid contextual learning is one of the key behavioral skills thatccounting students should possess. As accounting education moves away from a primarilyemorization-based scheme, knowing where to find supplemental information on accounting rules
e.g., online databases, expertise of seasoned auditors, and personal libraries� becomes a vital toolor students. Knowing how to search is as important as knowing where to look. Brief instructionn this area can go a long way to help students be effective auditors.
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Assignments can couple contextual learning with an emphasis on specialization to enhanceeam simulations. As they work in teams, students are assigned specialties and then refer to eachther when issues arise. Some courses have benefited from accounting “treasure hunts.” In thisxercise, students are provided only limited information to solve a problem. In lieu of full disclo-ure, a list of resources is provided where answers can be found.
upplemental InstructionAs we move away from a CPA-centric curriculum, greater reliance will be placed on certifi-
ation test prep courses �e.g., Becker, Kaplan, etc.�. Jones and Fields �2001� suggest that supple-ental instruction effectively increases academic performance. As more students move to these
upplemental instructional resources, the audit educator’s syllabus can be diversified into morengaging instruction and conceptual learning.
merging MethodsNew methods of conveying knowledge and identifying resources are continually being dis-
ussed and implemented. Additional work should be done to determine instructional media thatan be used to better convey the concepts outlined in this paper. Ideally, audit educators willpearhead this movement, sharing new ideas and methodologies to help one another prepareuditing students for the environment that awaits them in the real world.
CONCLUSIONThe arrival of the RTE represents a major tipping point for the auditing profession, one that
annot be ignored. Audit education must catch up with the progress being made in the rest of theusiness world in order to maintain relevance. The change we advocate is neither revolutionaryor impossible, but rather evolutionary and necessary. By taking proactive steps, today’s univer-ity instructors can train tomorrow’s auditors not only to be aware of the state of the art, but alsoo be able to take advantage of further progression of the field.
We contribute to the literature by linking the RTE environment to specific auditor skills. Weurther provide value by proposing educational media that can be integrated into the traditionalducational context and provide opportunities for students to acquire these skills. While none ofhe media are new, the context is unique and provides accounting academics with a framework toreatively train future professionals and a basis for future empirical pedagogical research.
While the discussion in this paper is focused primarily on the RTE’s impact on auditorraining, this issue cannot be separated from current standard setting practices and other extrinsicactors. For example, in the United States, individual state societies determine educational require-ents for accountants, and these requirements may not fully incorporate RTE concepts. The
eality is that students come to the educational environment to acquire employment, which isniversally contingent on professional certification. Without a dramatic shift in the focus of theseertifications, the educational approach may not be perceived as value adding and will create alear double bind.
Predicting the direction of future technology is a task fraught with difficulties �Christensen997�. Disruptive events, such as the emergence of the Internet, have substantially changed auditractice and consequently education needs. The ability of future auditors to apply their newfoundkills and knowledge is based upon the reaction time of audit firms and standard setters. Oncegain, the closed loop between auditing education and audit practice necessitates a proactivepproach from both sides.
Finally this position paper is forward-looking and incorporates a vision of what audit educa-ion can become, not a description of current practice. This paper is mainly normative and basedn internal logic and experiential evidence. There is a tremendous and as yet unfilled need for
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erious empirical research on audit education and consequent auditor career development, includ-ng attitudes, technical competences, behavioral skills, and career paths. The educational mediaiscussed in this paper are educational tools used over the years, following what we feel is aatural succession from current trends. Objective assessment and long term career monitoring andracking �cf. Schein 1971� are needed to guide the profession to a more RTE-relevant set ofrocedures.
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